There are two kinds of interest rates: Fixed and Floating, and you must know the basic differences and benefits of both to determine which is better fixed or variable home loan. I am a loan officer at a private bank, so let me give you a quick overview of both kinds. Fixed home loans are usually pricier than floating rates of interest, but the good thing is that there’s a certainty, since you know your repayments beforehand.
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Is Home Loan Interest a Variable Vs Fixed?
A fixed rate will be good if you’re fine with the EMI you’re scheduled to pay. Otherwise, you should opt for a floating rate if you expect the interest rates to fall and want to save on the costs. As per my experience, it gets confusing for people to choose between the two. In that case, you can opt for a combination loan, which is a part fixed and part floating. Then, you can switch between the both at a nominal rate.
I am sharing a few features and benefits of both fixed and floating rate of interest here, so take a note of it.
Fixed Rate of Interest | Floating Rate of Interest |
The interest rate is fixed throughout the tenure | Also known as adjustable rate home loan. If there’s a change in benchmark rate, interest rates change proportionately. |
A good option if you’re comfortable with the EMI | If you’re expecting the rate to fall in the coming years, this is a good option |
It gives a certainly and help you manage expenses better | It may help you save better |
The EMI will be 25% to 30% of your take-home monthly income | Reset generally happens quarterly or half of the financial year. It can also be linked to your loan anniversary. |
That’s all the features about the fixed and floating interest rates. If you are still feeling confused, my suggestion would be to opt for a combination of both, or you can speak with your lender for better guidance.
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Is Home Loan Interest a Variable Vs Fixed?
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2025-03-26T10:07:27+00:00 2025-03-29T22:16:29+00:00Comment
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